Interest Rates on Stafford Loans Could Double to 6.8 Percent in July if Congress Fails to Act; Scheduled Interest Rate Hike Comes on the Heels of a New Analysis Showing That Half of Young College Graduates Are Jobless or Underemployed

WASHINGTON, D.C.—After the Senate failed to block a filibuster today on the Stop the Student Loan Interest Rate Hike Act of 2012,U.S. Sen. Sherrod Brown (D-OH) vowed to keep fighting for Ohio students and invited Ohio’s college students and their families to share their financial aid stories on his website at brown.senate.gov/CollegeLoanStories. Brown will share some of the stories collected on his website with his colleagues through speeches on the Senate floor. More than 382,000 students across Ohio would be forced to pay significantly more in college loan costs unless Congress acts to block the interest rate from doubling on federally-subsidized Stafford loans. The Stop the Student Loan Interest Rate Hike Act of 2012 would maintain the current interest rate, which is set at 3.4 percent, and prevent a hike to 6.8 percent scheduled for July 1st.

“This fight is far from over. My colleagues who voted to block consideration of our bill need to hear from more college students and less from special interests. That’s why I’m asking students to share their student loan stories on my website. Tell me what low student loan rates have meant to your ability to afford college. Tell me how you would be affected if you had to pay more in student loan costs once you graduate. I’ll be collecting your stories and sharing them on the Senate floor and with my colleagues,” Brown said. “It’s disappointing that some in the Senate would rather preserve tax breaks for the wealthy than help our best and brightest afford the ever-rising cost of a college education.

“I will continue working for Ohio’s college students and middle-class families to ensure that they won’t have to pay more for their student loans come July. I encourage students and their families to share their financial aid stories on my website at brown.senate.gov/collegeloanstories,” Brown added. “Already, recent college graduates are struggling to find work, with half of young college graduates jobless or underemployed. Allowing the interest rates on federal student loans to double is a step backwards. Ohio students—and our economy—can’t afford this sucker-punch at a time when we need to be doing more to get our economy back on track.”

Student debt has reached nearly $1 trillion—exceeding credit cards and auto loans. Meanwhile, a new analysis released recently by the Associated Press found that half of young college graduates are either jobless or underemployed in positions that don't fully use their skills and knowledge.

According to the Senate Health, Education, Labor, and Pensions (HELP) Committee, a higher interest rate would add approximately $1,000 in loan debt per loan for the average student. The Stop the Student Loan Interest Rate Hike Act, which is fully paid for, would keep the student loan interest rate from climbing by eliminating a tax loophole that the watchdog agency, the Government Accountability Office (GAO), has determined is a problem that currently allows some shareholder-employees of so-called “S corporations” to avoid paying their fair share of Social Security and Medicare payroll taxes.

The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly-subsidized Stafford loans for undergraduate students to 3.4 percent over a set period of time, but the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but students still attending school after July 1st that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans, adding even more to their existing debt load.

Last year, Brown introduced the Student Loan Simplification and Opportunity Act of 2011, legislation that would simplify the student loan repayment process. This legislation would help borrowers avoid financial penalties for missed payments, save Ohio graduates money on their student loans, and bolster the federal Pell Grant program that helped send more than 240,000 Ohio students to college from 2008-2009.